BoE Discussions & Fiscal Speculation At The Fore Into The Weekend

Little to really add in the time since our previous UK STIR/Gilt market update re: fresh drivers, with participants eying the weekend exit door and discussing next week’s BoE decision now that offshore risk events have come and gone.

• Gilt futures sit a little above early afternoon lows, while cash gilts are -2.5bp to +1.5bp in yield terms as the curve twist steepens.
• BoE-dated OIS has stabilised, showing a little over 100bp of cuts through this year. That compares with ~90bp at one point yesterday’s and a little over 150bp at one point in the period between Christmas and New Year.
• A repricing of wider global central bank cutting cycles, local data and fiscal easing expectations have played into the move away from dovish cycle extremes in recent weeks.
• The most recent source reports on fiscal matters have suggested that Chancellor Hunt may not as much fiscal headroom as was first envisaged (per Treasury calculations).
• A little further forwards the strip prices the first 25bp cut come the end of the June ’24 MPC.